Credit agreements in South Africa

Credit provider - A credit provider is the party who supplies goods or services (in terms of an instalment sale agreement, for example), or who pays money (in terms, for example, of a secured or unsecured money loan, overdraft facility, pawn transaction or mortgage loan).

Micro lending as a category of the NCR usually speaks to credit providers that can borrow a maximum amount of R8 000 for a period of up to 6 months.

The creditor is entitled to sell the property if the money is not repaid by an agreed date, and to keep the proceeds of the sale.

Incidental credit agreements occur when goods or services are provided to a consumer over a period of time and a fee or interest is charged only if payment is not made by an agreed date.

The NCR is an independent organisation governed by a board, with a chief executive officer who may appoint inspectors and investigators.

The Act provides rules of practice, procedure, evidence and a list of possible orders in relation to the Tribunal.

It will also provide a way of monitoring South Africa's consumer debt levels, which the NCR is required to do.

The NCR's “Debt Counsellor Training Program Learners’ Guide” describes the debt counselor as “a registrant who is required to do certain tasks stipulated in the Act including facilitating, investigating, and recommending solutions for over-indebtedness.” Consumer courts - Consumer courts are tribunals established by provincial legislation.

The Act provides that certain disputes between a financial institution (like a bank) and a consumer, arising from a credit agreement, may be referred to the relevant ombud.

Consumers must accept or reject the quotation within five business days, giving them a chance to shop around for better or cheaper credit.

The details required for a small credit agreement (a principal debt of less than R15 000) are set out in Form 20.2 to the Regulations.

A credit grantor may choose to refuse credit for reasonable business reasons, but may not unfairly discriminate against a consumer relative to other consumers on the grounds of race, religion, pregnancy, marital status, ethnic or social origin, gender, sexual orientation, age, disability, culture, language, etc.

Consumers have the right to have information relating to rescinded judgments expunged (removed) from the records of credit bureaux.

Right of cooling-off - In certain circumstances, consumers may terminate agreements (in writing and properly delivered) within five business days of signing them.

This cooling-off right applies only to leases and instalment agreements that are concluded at a location other than the registered business premises of the credit provider.

Typically, this right will apply to credit sales on instalments (as in the cases of cars, books, household appliances) concluded at the consumer's home or place of work.

This means that a consumer may request from the credit provider the balance due, pay the entire amount, and not be penalised for doing so.

This notice may be given at least sixty days after the date of application for debt review: that is, if the debt-review process is dragging on too long.

If the court finds the consumer to be over-indebted, it may make an order While an agreement is suspended (not set aside), After the period of suspension ends, all the parties’ rights and obligations are revived and become enforceable again.

It is critical that one understand the full implications of the new cost-of-credit provisions in the National Credit Act and Regulations.

However, registered micro-lenders were made exempt from the Usury Act from 1992, meaning that they were entitled to charge whatever interest rates they liked.

It is a once-off payment made by the consumer on conclusion of the credit agreement or payable in instalments (as a separate loan attracting interest).

[6] It appears that the service fee was standardised in order to simplify the application of the Act, justifiable on the basis that every loan, no matter what its size, needs to be administered.

Thus, for example, it was a criminal offence to charge interest higher than the Usury Act maximum, which is no longer the case.

However, the Act does provide a number of civil legal remedies for consumers, some of which are drastic departures from previous law.

This is in line with international consumer legislation, but the Act's provisions have been criticised as being unusually cumbersome and detrimental to credit providers.

A much larger number of requests for default judgment on credit agreements now have to be referred to a magistrate,[14] rather than being dealt with by the clerk of the court.

This will greatly increase the workload of the magistrates, and could cause debt enforcement procedures to take much longer, resulting in frustration for credit providers.

If the proceeds of the sale are not sufficient to settle the account, the credit provider may approach the court for an order to recover the outstanding balance.

This implies that the mortgagee (a bank, usually) will be able to rely only on the proceeds of the sale of the property to settle the account-even if this is insufficient, and even if the mortgagor (the debtor) is very wealthy and has other assets that could be attached.